American Depository Receipts (ADRs) represent shares of a foreign company that trade on an American stock exchange. There are three levels of ADRs with different regulatory requirements. Level 1 ADRs trade over-the-counter with the least regulation, while Level 3 ADRs have the most rigorous regulations, potentially including raising capital from US investors. ADRs make it possible for US investors to gain international stock exposure without having to deal with foreign exchange or open overseas accounts. Global Depository Receipts (GDRs) operate similarly but trade on exchanges outside the US, while Indian Depository Receipts (IDRs) allow foreign companies to issue shares to Indian investors.

1. Infosys American Depository Receipts (ADR)Anshuman Jaiswal (G09051)Charlton DCosta (G09053)Deepti Chand (G09055)GMP, XLRI, Jamshedpur

2. What is ADRCertificates that represent shares of a foreign stock owned and issued by a U.S bankThey buy up shares of the foreign stock and repackage them into securities which can be traded on the NYSE, NASDAQ or AMEX.The foreign shares are usually held in custody overseas, but the certificates trade in the U.S. They provide easy access to gaining international equities exposure without actually having to exchange currencies and open additional accounts to transact in overseasGMP, XLRI, Jamshedpur

3. TYPES OF ADRLevel 1 – Basic, common, traded on OTC, least regulation, no US accounting standard, no annual reportsLevel 2 – Listed on stock exchange, higher trading volumesLevel 3 – Most rigorous regulations, go as far as raising capital from US investorsIf the depository receipt is traded in the United States of America (USA), it is called an American Depository Receipt, or an ADR. GMP, XLRI, Jamshedpur

4. GDRs and IDRSIf the depository receipt is traded in a country other than USA, it is called a Global Depository Receipt GDR gives access to two or more marketsADRs and GDRs are an excellent means of investment for NRIs & foreign nationals wanting to invest in India IDR is instrument in form of Depository Receipt created by the Indian depository in India against the underlying equity of investing company.Foreign companies  Issue shares, to Indian Depository  Issue depository receipts.The actual shares underlying the IDRs held by Overseas Custodian.GMP, XLRI, Jamshedpur

5. Issuance ProcessGMP, XLRI, Jamshedpur

6. ADR TerminationGMP, XLRI, Jamshedpur

7. How to price ADR Each ADR represent a single share, a fraction of shares or multiple shares. The depository bank sets the ratio of US ADRS per home country share. Ratio can be =1,<1 and >1Once ADR priced & sold in the market, its price moves based on the market conditions GMP, XLRI, Jamshedpur

8. ADR: Companies/Shareholder's perspectiveDisadvantagesAdvantagesLimited selectionLiquidityExchange rate riskLimited DiversificationCost EffectiveHassle Free Ease of UsageRisk DiversificationProtection of OwnershipGMP, XLRI, Jamshedpur

9. Summary of the Infosys ADRs issued* % of share in the form of ADRs as on March 31, 2007GMP, XLRI, Jamshedpur

10. Infosys ADR: 11th March 1999GMP, XLRI, Jamshedpur

11. First Sponsored secondary ADS: July 31, 2003GMP, XLRI, Jamshedpur

12. Second sponsored secondary issue: May 2005GMP, XLRI, Jamshedpur

13. Third sponsored secondary issue: November 21, 2006GMP, XLRI, Jamshedpur

14. Reasons why ADR’s was overpricedExcess demand with limited supply of ADR’s. Few opportunities in the US to invest in companies that are growing at the 20–30% ratesOfficial barriers prevent foreign investors from buying the shares trading in India Returns are negatively correlated with other assets held by them.ADR’s provides a value added layer – transparency, liquidity and greater coverage than the existing Indian stock.GMP, XLRI, Jamshedpur

15. Return Behavior :INFY ADS vs. NASDAQ vs. Infosys TechGMP, XLRI, Jamshedpur

16. 10 year viewGMP, XLRI, Jamshedpur

17. Factors Inducing Differences in Returns between Domestic Shares and ADRsTime Difference Exchange RatesMarket Friction and Trading Restrictions Macro Events GMP, XLRI, Jamshedpur

18. THANK YOU!!GMP, XLRI, Jamshedpur